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Real interest parity: A note on Asian countries using panel stationarity tests

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  • Holmes, Mark J.
  • Otero, Jesús
  • Panagiotidis, Theodore

Abstract

Existing panel data studies of real interest parity are either unable to identify which panel members are characterised by stationary real interest differentials, or are subject to size distortion resulting from the presence of structural breaks and cross-sectional dependencies. Using a panel stationarity testing procedure recently advocated by Hadri and Rao (2008) that allows for structural breaks and cross-sectional dependency, we are unable to reject the stationarity of Asian real interest rate differentials.

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File URL: http://www.sciencedirect.com/science/article/pii/S1049007811000406
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 22 (2011)
Issue (Month): 6 ()
Pages: 550-557

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Handle: RePEc:eee:asieco:v:22:y:2011:i:6:p:550-557

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Web page: http://www.elsevier.com/locate/asieco

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Keywords: Heterogeneous dynamic panels; Real interest parity; Mean reversion; Panel stationarity test;

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  1. Josep Carrion-i-Silvestre & Andreu Sansó, 2006. "A guide to the computation of stationarity tests," Empirical Economics, Springer, vol. 31(2), pages 433-448, June.
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Cited by:
  1. Baharumshah, Ahmad Zubaidi & Soon, Siew-Voon & Hamzah, Nor Aishah, 2013. "Parity reversion in real interest rate in the Asian countries: Further evidence based on local-persistent model," Economic Modelling, Elsevier, vol. 35(C), pages 634-642.
  2. Baharumshah, Ahmad Zubaidi & Soon, Siew-Voon & Boršič, Darja, 2013. "Real interest parity in Central and Eastern European countries: Evidence on integration into EU and the US markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 163-180.
  3. Chan, Tze-Haw & Baharumshah, Ahmad Zubaidi, 2012. "Financial Integration between China and Asia Pacific Trading Partners: Parities Evidence from the First- and Second-generation Panel Tests," MPRA Paper 37801, University Library of Munich, Germany.

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